PUTRAJAYA - Prime Minister Najib Razak unveiled measures to claw back an expected RM9 billion (S$3.05 billion) of lost oil revenue in a "recalibration" of Budget 2016 after the commodity's seemingly bottomless dive in recent weeks, while also giving consumers more flexibility in a bid to boost the domestic economy in the face of the current global downturn.
Among savings measures was an order to reschedule "non-physical projects" to save commitments of RM5 billion, although affordable homes, schools, transport and security would be prioritised.
"The government will continue to spend prudently by prioritising projects and programmes with high impact centred on the philosophy of the people economy," he said in a speech televised live nationally.
With inflation and unemployment expected to soar and growth rates heading south (the government has revised earlier projections downwards from up to 5 per cent to between 4 per cent and 4.5 per cent), Datuk Seri Najib's commitment to reining in spending is being tested even as he faces growing public angst over their recent shrinking purchasing power. Instead, he offered tax relief worth RM350 million to those earning RM8,000 or less per month. This will take 160,000 completely out of the taxable bracket, with a total of two million saving up to RM475 in taxes.
Mr Najib, who is also Finance Minister, allowed employees to reduce their compulsory contribution to the Employees' Provident Fund by 3 percentage points, a move that is expected to increase private consumption by RM8 billion a year.
The government expects to meet its deficit target of 3.1 per cent of GDP despite the revision of expected oil prices to between US$30 and US$35 per barrel, from the projection of US$48 used when Budget 2016 was first tabled in October last year.